Department of Education Releases Final Regulatory Text for Graduate Loan Changes

The Department of Education released its proposed rule from the Reimagining and Improving Student Education (RISE) negotiated rulemaking committee, which was tasked with implementing the student loan and repayment provisions contained in the One Big Beautiful Bill Act (OB3).

This Notice of Proposed Rulemaking (NPRM) is a sweeping restructuring of federal student loan eligibility, limits, and repayment pathways across federal loan programs. Its most consequential effects for higher education institutions concern the new distinction between graduate and professional students and sharply constrains financing options for post-baccalaureate education.

Of particular concern is the extremely narrow definition of “professional student,” which fails to reflect the contemporary structure of advanced education and ever-changing labor-market needs. Because OB3 tied this definition to federal student loan borrowing limits, the new rules impose systemic constraints on institutions and students alike.

The proposed rule is in line with expectations and does not deviate from the general policy agreement forged by consensus during negotiated rulemaking.

Definition of “professional student”

The rule codifies a formal definition of “professional student.” Under § 685.102, a professional student is limited to individuals enrolled in programs that:

• Award a professional degree, generally at the doctoral level;
• Require at least six academic years of postsecondary study, including two years post-baccalaureate;
• Are tied to professional licensure; and
• Fall within a closed list of degrees within certain fields:
• Pharmacy (Pharm.D.),
• Dentistry (D.D.S. or D.M.D.),
• Veterinary Medicine (D.V.M.),
• Chiropractic (D.C. or D.C.M.),
• Law (L.L.B. or J.D.),
• Medicine (M.D.),
• Optometry (O.D.),
• Osteopathic Medicine (D.O.),
• Podiatry (D.P.M., D.P., or Pod.D.),
• Theology (M.Div., or M.H.L.), and
• Clinical Psychology (Psy.D. or Ph.D.).

The list of programs comes from an existing Department definition (34 CFR 668.2) of the term “professional degree.” The original text states, “Examples of a professional degree include but are not limited to...” indicating that the list is not meant to be exhaustive, which NAICU interpreted as giving the Department latitude to determine how it wished to draw boundaries around professional programs.

NAICU urged the Department to avoid creating a list of all eligible programs and, instead, create a process that allows institutions to independently identify their professional programs, with oversight through backend reviews conducted by the agency. This approach to allowing institutions to interpret the definition would be preferable because a list will almost certainly exclude otherwise eligible programs and need to be deliberately updated over time. A more flexible process would give institutions the ability to determine which of their programs qualified under the definition, maximize institutional flexibility, and minimize the impact to students and the Department’s administrative burden.

Instead, the Department interpreted the existing language in the strictest sense and only added a single program to the list of ten fields contained in the original definition: clinical psychology.

Thus, the new definition intentionally excludes a wide array of advanced and practice-oriented graduate programs that function as professional pipelines, such as public health, nursing, physician assistants, occupational and physical therapists, audiologists, allied health fields, data science, engineering, architecture, business analytics, education leadership, social work, and emerging interdisciplinary credentials. The result is a regulation that formalizes an outdated conception of “professional” that is misaligned with current workforce realities.

Consequences of the new rules

The definition of “professional student” restricts access to federal student loan programs, in addition to the other loan eligibility and financing constraints established through OB3.

• Grad PLUS wind down. Graduate and professional students are barred from new Direct PLUS Loans beginning July 1, 2026, with only a limited grandfathering exemption for currently enrolled students for three years, or until their “expected time to credential.”
• Unsubsidized loan limits. Annual and aggregate unsubsidized loan caps diverge sharply:
  • Annual unsubsidized loan limits:
    • $50,000 per year for professional students.
    • $20,500 per year for all other graduate students.
  • Aggregate unsubsidized loan limits:
    • $200,000 for professional students.
    • $100,000 for all other graduate students.

Programs excluded from the professional category must therefore operate under dramatically reduced federal financing capacity, regardless of instructional cost, licensure requirements, or labor-market necessity. Institutions offering high-cost, workforce-critical graduate programs outside the enumerated professional fields will likely face a mismatch between federal loan limits and their actual cost to deliver the programs.

Effects of these changes on program viability

With students’ financial aid eligibility anchored to a static list of programs, the new rules pressure institutions to make difficult decisions regarding program offerings and enrollment, such as:

• Restructuring curricula to fit within recognized professional groupings, which is likely impossible for most programs;
• Discouraging enrollment in excluded graduate programs;
• Shifting costs to institutional aid, which is often limited, or private lending, which is not available for many students; or
• Reducing program scale or eliminating offerings entirely.

This dynamic undermines institutional autonomy and innovation, particularly for nonprofit and mission-driven institutions that operate advanced programs aligned with public-sector, healthcare-adjacent, or emerging technical fields, limiting the ability of higher education to respond to changing labor market demands.

Workforce and public interest implications

The limited expansion of professional status has downstream workforce effects that the regulation does not address. Many excluded graduate programs are primary pipelines for public administration and governance; mental health and human services; education leadership; and applied STEM and infrastructure fields.

Limiting access to federal financing in these areas risks reducing enrollment precisely where labor shortages are most acute, particularly for students from modest-income backgrounds who lack access to private credit markets, which may not even exist for certain programs. In this respect, the rule favors legacy, high-income professions while constricting newer and public-facing professions, reinforcing inequities across sectors of the workforce.

Conclusion

From an institutional perspective, the proposed rule’s treatment of professional students reflects a broader pattern in the RISE framework: risk containment is achieved not through program-level differentiation or free market demand, but through categorical exclusion. The absence of a mechanism to recognize evolving professional standards, licensure pathways, or market-validated graduate credentials creates a structural rigidity that disadvantages both institutions and students without clearly advancing accountability or affordability goals.

While the regulation expands certain repayment and forgiveness pathways, these downstream mitigations do not offset the front-end contraction in access to capital created by the professional-student definition. For colleges and universities, particularly private, nonprofit institutions, the result is heightened financial risk, constrained program design, and diminished capacity to respond to workforce needs.

By narrowly circumscribing the definition of “professional student,” the regulation essentially freezes the professional landscape in place at a time when higher education and the economy require adaptability, interdisciplinary training, and new credential pathways. From the standpoint of institutional sustainability and workforce alignment, this rule warrants scrutiny and reconsideration.

NAICU will submit comments to the Department on this NPRM and encourages interested parties to submit comments as well. Comments are due on or before March 2, 2026.

For more information, please contact:
Justin Monk